Bells' fiber plans spark political flame war

Verizon Communications and SBC Communications' plans to wire American homes with high-speed fiber connections may encounter regulatory roadblocks, members of Congress suggested Wednesday.

Both companies are spending billions on fiber links that can carry everything from Internet service to voice and video. Verizon's Fios service already boasts speeds of up to 30 megabits per second with a digital TV package expected later this year. SBC's similar Lightspeed service is supposed to be available no later than early 2006.

These forays into digital TV are alarming television broadcasters and some cable companies, which view fiber service as a competitive threat. This week, for instance, Verizon announced that it plans to carry all of NBC Universal's channels on Fios TV.

The emerging dispute over digital TV effectively opens up a new political front in an already bitter war between the Bells and cable companies for high-speed Internet customers.

"Stations would lose audience share and advertising dollars, and these dollars fund local programming that makes broadcasting valuable," Greg Schmidt, a lawyer speaking on behalf of the influential National Association of Broadcasters, told a House of Representatives panel on Wednesday. The NAB represents local radio and TV broadcasters.

Congress should prohibit SBC and Verizon from offering digital TV unless the companies follow an extensive list of government regulations, Schmidt said. Among them: Local broadcasters must remain the only source for network programming; fiber providers must be required to "black out" the availability of certain sports games; and local TV broadcasts must be carried on fiber networks.

Rep. Rick Boucher, a Virginia Democrat, rattled off a list of possible regulatory requirements, adding privacy rules and set-top box interoperability to Schmidt's suggestions. "Would you be willing to abide by public access channel requirements?" Boucher asked. Other subcommittee members suggested that "indecency" rules limiting off-color content should apply.

"We attach public-interest responsibility to the companies that are going to benefit from those laws," said Rep. Ed Markey, a Massachusetts Democrat. "Should SBC not be bound by those laws?"

When a cable company wires a community, it must offer service to all households, Markey said, so why should Verizon and SBC be permitted to select which neighborhoods are wired with fiber first? "You
have Lightspeed for the well-off and 'snail-speed' for everyone else, which is the bottom 50 percentile," Markey told SBC.

"We're going to be investing $2 billion in the next year," replied Lea Ann Champion, SBC's vice president for IP operations. Technological advances will permit SBC to move rapidly in offering fiber links to half of its 36 million customers, Champion said.

David Cohen, a vice president at Comcast, said that in general, his company does not like to seek government favors for competitive advantages. But, Cohen warned, "there are some questions about who is going to preserve the interests of localism."

One point of contention is the "franchise fee" arrangement that permits municipalities to bill companies for using their public facilities, such as light poles and sewers, to deliver TV signals. Earlier this week, Verizon CEO Ivan Seidenberg called for changes to franchise fees, saying the Bells should not be charged extra when they start serving up digital TV signals.

"We're being asked to obtain a second franchise," Robert Ingalls, head of Verizon's retail markets group, told Congress on Wednesday. That's "unnecessary and will delay effective video competition for years."

A broader question is whether Congress will dictate TV-over-fiber rules through legislative fiat or whether the companies involved will be left to negotiate their own arrangements. "All of these guys are big boys and can work out these deals among themselves," said Adam Thierer, an analyst at the free-market Progress and Freedom Foundation. "We don't need government to come in and broker contracts."